Are big mergers bad for consumers?

This year is set to be a record for company deals. A whopping $4.1trn (£2.7trn) of mergers and acquisitions (M&A) are tipped to take place globally in 2015, an all-time high.

In October alone, home computing giant Dell agreed to buy the network storage company EMC for hefty $67bn.

And AB InBev offered £70bn for rival SAB Miller in a deal that would result in it selling one in three beers on the shelf globally.

But while such mergers are designed to be advantageous for the companies involved - extending their reach, say, or reducing their costs - it is unclear whether they also benefit consumers.

Credit Lyonnais Securities Asia has pointed out that AB InBev has a history of buying up competitors and then steering consumers towards pricier beers.

And John Colley, associate dean at Warwick Business School, tells the BBC: "Generally speaking, as industries consolidate down to fewer players, prices increase because there is less competition.

"You tend to end up with less choice of products too," he adds.

So just how worried should consumers be, and what can they do to protect themselves?

In the last six financial years, the UK's Competition & Markets Authority (CMA) and its predecessor the Competition Commission (CC) have had 50 mergers referred to it, of which half were cleared.

That said, it has imposed 'remedies' - typically divestments - on nine occasions and prohibited four deals, while a further nine were abandoned when referred to the regulator.

Sheldon Mills, senior director of mergers at the CMA, says the regulator's main concern is "whether one competitor leaving the market allows others to increase their prices".

"For instance, we would look at whether the two firms compete in the same market - an easy analogy is Coke and Pepsi.

"Then we would ask whether the two firms are 'close' - do they respond to each other on prices, do they advertise against each other, do they respond to each other on the quality of their stores or brand."

He gives the example of Reckitt Benckiser's acquisition of sexual lubricants firm K-Y in August.

Reckitt, which owns rival provider Durex, stood to hold 75% of the UK's lubricants market after the deal, but the CMA said this would push up high street prices.

So while it approved the merger, the CMA ruled that Reckitt Benckiser should licence out the K-Y brand in the UK for eight years to a competitor, to give a rival time to develop a new brand to challenge Durex's range.

However, by its own admission, the CMA's remedies do not always achieve the desired effect.

And as Dr Colley warns, the regulator usually only looks at a deal if the combination creates at least a 25% market share.

"Let's say an industry has 10 key players and each has 10% of the market," he says.

"If five of them joined up that might be acceptable to the competition authorities, but rest assured prices will become more robust."

He points to research showing that the greater market power arising from mergers "typically results in higher prices".

And he says studies consistently find "between 60% and 80% of acquisitions fail to deliver the expected benefits to shareholders, too".

"I've sat on the other side of the fence for long enough in my life," says the former company chairman and managing director.

"Normally when you construct your public relations you have to make a merger sound like it is in the consumer's interest - but the truth is often not that."

But Scott Moeller, director of the M&A Research Centre at Cass Business School, disagrees.

According to his research, while mergers do push up prices in the short term they are "usually consumer positive" in the long term.

"The costs to mergers tend to come straight after the deal happens," he explains.

"So when a company's looking for synergies, the first thing they might have to do is fire some people or close down a plant."

He says that as a result, a company may try to offset this by pushing up prices.

"But, over time they can operate more efficiently because they get the savings they predicted, and that ends up benefitting customers," he says.

He cites a study in the American Economic Review which looked at the US high street banking sector.

It found that right after a merger, customers did start getting worse rates of interest paid into their bank accounts, but "in year two and three they actually got better rates".

Complicating matters, both academics concede that industries are always evolving all the time and this can offset the effect of mergers.

As Dr Colley points out, after a period of merger activity, the UK's supermarket industry has just four big players, holding more than 70% of the market.

But while this initially pushed up prices, low cost chains such as Aldi and Lidl emerged and "now prices are collapsing as the big four lose share".

Similarly, after a spate of big tie-ups, four major airlines operate the majority of domestic flights in the US, down from seven in 2007.

And according to a report by the US Government Accountability Office last year, from 2007-2012 airfares went up by 4% and flights got busier.

However, the agency also found the mergers had led to new connections in some markets and allowed the bigger operators to return to profitability following the recession.

They had invested in new planes and services such as early boarding and entertainment options which improved the customer experience.

With major investigations underway in the UK into heavily consolidated markets, such as energy and banking, consumers would be wise to remain on their guard.

Regulators around the world are already scrutinising the AB InBev deal for fear it will reduce competition, too.

Chief executive Carlos Brito has promised the merger will bring "more beers to more people and enhance value for all of our stakeholders".

But if the price of a pint goes up, he'll have a lot of unhappy customers to answer to.